I have the iPhone 4, and just installed the 1809 with the iPod cable. When I plug the iPhone in, it displays two messages, the one similar to what you described ("This device not optimized for iPhone" or something) and another one that says "This device does not support charging" or something like that. You just have to hit "OK" to both messages, then it lets you play your music. So, to answer your questions:
1. Yes, newer iPods and iPhones are compatible, but will not charge without an adapter like this:
dockStubz Charge Converter and 30-pin Pass-Through Adapter. Also, you will have to deal with those annoying pop-ups every time you plug the phone in. (I'm assuming the one about charging will go away if using the adapter.)
2. I ran the cable under the center console and have it coming out of one of the switch blanks. I used a dremel to make an opening in one of the switch blanks large enough for the cable to pass through. It looks pretty sweet!
One other thing to note, the 1809 lets you control the iPhone using two different modes: direct and non-direct. Non-direct allows you to control the iPhone via the head unit and retains all of the factory steering wheel controls. Direct allows you to control the iPhone as you normally would using headphones/whatever, but the steering wheel controls will not function (except the volume control, which always is functional).
Hope this helps!
Nick